Housing prices are booming in the Northwest

The 20 city-index, which covers major metropolitan areas like Seattle and Chicago, rose by 5.27%, above economists' expectations of 5.03%, and up from 5.1% in October.

Seattle (+10.4%), Portland (10.1%), and Denver (+8.7%) continued to see the largest annual gains.

Meanwhile, the overall National Home Price Index, which measures all nine US census divisions, rose by 5.6% on an annual basis, up from 5.5% in October.

"National home prices continue to grow at a rapid clip, largely driven upward by the now-familiar forces of high demand from home buyers and limited supply of homes available for sale," Svenja Gudll, Zillow chief economist said after the report.

"But even as the pace of home value growth keeps rising, growth in rents is flattening out and stabilizing, which – combined with a series of other factors – will likely begin impacting the for-sale market sooner or later."

Though home prices are back at levels seen in the most recent housing bubble, economists contend that speculation and euphoria are not driving the market this time.